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Full text of "Subleasing boat berths at the Marina Yacht Harbor"

SAN FRANCISCO PUBLIC LIBRARY 



3 1223 06255 9654 



CITY AND COUNTY 




Public Library, Documents Dept, 

Attn: Kate Wingerson 



DOCUMENTS DEPT. 

my 21 7997 



OF SAN FRANCISCO 



SAN FRANCISCO 
PUBLIC LIBRARy 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 

FAX (415) 252-0461 




Cisco Public Library 



November 19, 1997 



Una 



: Berths at the Marina Yacht Harbor 



n--- '•■'nrmption Center 

■ i;biic Library 

■ 5th Floor 
CA 94102 

RENCE BOOK 

taken from the library 



d in response to your request concerning the financial 
y the practice of boat berth lease holders subleasing 
d that your office has concerns that lease holders at 
rofiting from subleasing their berths at a rate above 



cht Harbor currently leases 700 boat berths 
of vessels. Costs for boat berths range from $4.81 to 
h, or annual fees of $1,156 for a 20-foot berth to $6,670 

-..^ ^«cht Harbor maintains 16 separate waiting lists for 

11 craft berths because of the different berth sizes available. Currently there 
total of 362 persons on the waiting Usts for a berth assignment. 

ent Subleasing Rules and Regulations 

In order to lease a boat berth from the City, the boat owner must sign a 
e agreement with the City. The terms of the lease require that no boat other 
the one described in the lease agreement shall be berthed in the assigned 
! without the approval of the Harbormaster. According to the Yacht Harbor's 
s Illations, a lease holder is permitted to sublease his or her boat 

h P 3d of up to 6 months in any 12-month period, provided that the boat 
eQ dblessee is registered with the Harbormaster. 



REF 
387 .15 
Sa52s 



Public Library, Documents Dept, 

Attn: Kate Wingers on 




SAN FRANCISCO PUBLIC LIBRARY 



ill 



DOCUMENTS DEPT. 

NOV 21 1997 



CITY AND COUNTY 




OF SAN FRANCISCO 



SAN FRANCISCO 
PUBLIC LIBRARY 



BOARD OF SUPERVISORS 



BUDGET ANALYST 



1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 

FAX (415) 252-0461 



November 19, 1997 



Supervisor Medina 



FROM: Budget Analyst 

SUBJECT: Subleasing Boat Berths at the Marina Yacht Harbor 



This report is prepared in response to your request concerning the financial 
costs to the City incurred by the practice of boat berth lease holders subleasing 
their berths. We understand that your office has concerns that lease holders at 
the Yacht Harbor may be profiting fi'om subleasing their berths at a rate above 
that which they pay to the City. 

Background 

The City-owned Yacht Harbor currently leases 700 boat berths 
accommodating various sizes of vessels. Costs for boat berths range from $4.81 to 
$6.18 per linear foot per month, or annual fees of $1,156 for a 20-foot berth to $6,670 
for a 90-foot berth. The Yacht Harbor maintains 16 separate waiting lists for 
small craft berths because of the different berth sizes available. Currently there 
are a total of 362 persons on the waiting lists for a berth assignment. 

Current Subleasing Rules and Regulations 

In order to lease a boat berth from the City, the boat owner must sign a 
lease agreement with the City. The terms of the lease require that no boat other 
than the one described in the lease agreement shall be berthed in the assigned 
space without the approval of the Harbormaster. According to the Yacht Harbor's 
Rules and Regulations, a lease holder is permitted to sublease his or her boat 
berth for a period of up to 6 months in any 12-month period, provided that the boat 
owned by the sublessee is registered with the Harbormaster. 



Memo to Supervisor Medina 
November 19, 1997 
Page 2 

At the expiration of the sublease period, both the lease holder and the 
sublessee must relinquish the berth if the lease holder does not return his or her 
boat to the berth. Furthermore, the Rules and Regulations state that the berth 
assignment of any lease holder who occupies liis or her assigned berth for a total 
of less than six months in any twelve month period shall be canceled except when 
specific exceptions are granted by the Marina Manager. 

Enforcement of Rules and Regulations 

Mr. Charles Roller, Associate Harbormaster of the Yacht Harbor, advises 
that the Rules and Regulations concerning subleasing at the Yacht Harbor have 
been difficult for employees of the Yacht Harbor to enforce. According to Mr. 
Roller, although required to do so, boat owners who sublease their berths do not 
regularly advise the Harbormaster when they sublease their berths. Mr. Roller 
advises that the Yacht Harbor has only recently implemented a regular once a 
week check of the vessel registration numbers of boats berthed in the Yacht 
Harbor against the Yacht Harbor's master list to ensure that any boat occupying a 
berth is the one registered by the owner or that of a sublessee which has been 
previously approved by the Harbormaster. According to Mr. Roller, in the past 
such checks were conducted only on a sporadic basis. 

When the Yacht Harbor determines that a boat occupying a berth does not 
carry a registration number which matches that which is on file with the 
Harbormaster, a letter is mailed to the lease holder. Mr. Roller states that, in 
many cases, the lease holder is unreachable or unresponsive to the letter. Mr. 
Roller advises that, in such cases, it is rare that further enforcement actions are 
carried out because the administrative procedures required to identify and contact 
the boat owner and remove an unregistered boat fi:om a berth are difficult and 
time consuming. 

As stated above, a lease holder is permitted to sublease his or her berth for 
up to six months in any twelve month period. Mr. Roller describes the Yacht 
Harbor's attempts to keep track of the periods in which a lease holder subleases 
his or her berth as an "administrative nightmare" and that violators of this rule 
are not usually identified or penalized. As of the writing of this report, the Yacht 
Harbor has not provided the Budget Analyst with documentation of the number or 
length of time that the Yacht Harbor approved the subleasing of berths over the 
past year. Because the Rules and Regidations concerning subleasing are not 
regularly enforced, there is an increased likelihood that an abuse of subleasing 
privileges by some lease holders could be taking place. 

Subleasing Berths at a Profit 

According to Ms. Mariam Morley of the City Attorney's Office, under the 
current Rules and Regulations at the Yacht Harbor, a lease holder is not 
prohibited fi'om charging a sublessee, and retaining, an amount that exceeds the 
lease costs charged by the City, provided that the lease holder has received the 
prior approval of the Marina Manager to sublease the berth. Mr. Roller advises 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Supervisor Medina 
November 19, 1997 
Page 3 

that it is suspected that the practice of lease holders subleasing berths for profit 
has occurred at the Yacht Harbor. According to Mr. KoUer, the Yacht Harbor is 
aware of several instances in which a berth sublease was advertised at a rate 
above that charged by the City. However, because the subleasing arrangement 
between a lease holder and a sublessee is a private agreement, the Yacht Harbor 
is unable to provide any documentation as to what extent the practice may be 
occurring or the amount of profit lease holders may receive through this practice. 

As noted above, if the Marina Manager has approved a lease holder's 
request to sublease, the lease holder can charge the sublessee any amount 
whatsoever and all proceeds from the sublease can legally belong to the lease 
holder and not to the City even if the proceeds from the sublease exceed the lease 
costs charged by the City to the lease holder. Under the Yacht Harbor Rules and 
Regulations, the lease holder is solely responsible for paying all fees due to the 
City for his or her berth on an annual basis, including during periods when the 
berth is subleased. Therefore, although the possibility exists that a lease holder 
may be profiting from his or her berth by subleasing at a rate higher than what 
the lease holder pays to the City, the City continues to receive payment in full for 
each berth. 

Proposed Changes to the Rules and Regulations 

Mr. Roller has advised the Budget Analyst that the Yacht Harbor is 
drafting new Rules and Regulations that address subleasing which will be 
presented to the Recreation and Park Commission as soon as possible. According 
to Mr. KoUer, the Yacht Harbor proposes to prohibit lease holders from directly 
subleasing their berths and, instead, transfer subleasing authority directly to the 
Yacht Harbor. Under the proposed changes, a lease holder would continue to be 
permitted to leave his or her berth unoccupied for up to six months in any twelve 
month period. The lease holder would remain responsible for the rental rate in 
full during his or her absence, however, the Harbormaster would make a good 
faith effort to sublease the berth and, if successful, would charge the sublessee the 
full rate. If the Harbormaster subleased the berth, the lease holder would then 
receive a reduction in rent for the period of time the berth is subleased. The Yacht 
Harbor recently conducted a survey of ten municipal marinas in the Bay Area 
and found that similar subleasing policies are in place in the majority of 
municipal marinas in the Bay Area, ranging fi-om a reduction in rent of one-half 
to one-third while the berth is subleased by a marina. 

The Budget Analyst notes that the transfer of authority to sublease berths 
from the lease holders directly to the Yacht Harbor may result in increased 
administrative costs to the City. However, if the Yacht Harbor is successful in 
finding boat owners willing to sublease the temporarily vacant spaces, the City 
may increase revenues by collecting the full rental rate from the sublessee in 
addition to the reduced rental rate of one-half to two-thirds of the full rate from the 
lease holder. The Budget Analyst notes that, although under the proposed new 
rules the Yacht Harbor may increase its berth rental revenues, any increase 
would be dependent upon the Yacht Harbor's success in making such a 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Supervisor Medina 
November 19, 1997 
Page 4 

subleasing program work. Furthermore, it would not remove the need for the 
Yacht Harbor to strengthen its record keeping and enforcement procedures to 
ensure that lease holders are not violating the subleasing policy and that only 
lease holder- or registered sublessee-owned boats occupy the berths. 

In addition to the rules regarding subleases, Mr. KoUer advises that the 
Yacht Harbor will propose to the Recreation and Park Commission the 
elimination of a lease holder's ability to transfer his or her berth to a second party 
through the sale of his or her boat. Currently, a lease holder may transfer his or 
her berth to a new person by selling the boat that is moored in a berth. When this ^ 
takes place, the boat buyer pays a transfer fee to the City of $20 per linear berth foot 
and assumes the lease for that berth. According to Mr. Roller, it is suspected that 
some lease holders may obtain payment for a boat in excess of the vessel's fair 
market value due to the fact that the buyer of the boat will also get a berth lease at 
the Yacht Harbor. Mr. Roller reports that once a berth lease transfer takes place, 
the boat buyer may simply sell or otherwise remove the original boat and use the 
berth for another boat (provided it is within the berth's size requirements), 
allowing that person to circumvent the Yacht Harbor's berth waiting list. 

According to Mr. Roller, under the proposed new rules, a lease holder 
would no longer be permitted to transfer his or her berth to a person who 
purchases his or her boat. According to Mr. Roller, under the proposed rule 
changes, the Yacht Harbor would no longer receive income from transfer fees, 
which totaled $12,300 in FY 1996-97. Mr. Roller states, however, that termination 
of the berth transfer option would eliminate the potential for a lease holder to 
profit from the City's property through this practice and promote fairness by 
giving those boat owners who are on the waiting lists greater opportunities to 
obtain a berth at the Yacht Hsirbor. 




Harvey M. Rose 



cc: President Raufman 
Supervisor Brown 
Supervisor Ammiano 
Supervisor Bierman 
Supervisor Ratz 
Supervisor Leal 
Supervisor Newsom 
Supervisor Teng 
Supervisor Yaki 
Supervisor Yee 
Clerk of the Board 



Controller 
Matthew Hymel 
Stephen Rawa 
Ted Lakey 
Joel Robinson 
Ron DeLeon 
Gary Davis 



3 1223 06255 9654 



BOARD OF SUPERVISORS 
BUDGET ANALYST